India: Concerns Relating To Standard Essential Patents And Warring Smartphone Makers

Last Updated: 1 November 2015
Article by Anupam Sanghi

The smartphone market is no stranger to legal struggles – Apple and Samsung have had legendary battles over patent disputes but this has largely been the case in US & Europe. However, the ripple effect is beginning to show in the Indian and also around Asian market with growing competitiveness between brands. In the last few years Patent holders like Ericsson, Google have been locked in litigation, around the world, particularly over Licenses relating to their Standard Essential Patents ( SEPs) given to Smartphone manufacturers.

Brands like Micromax and Karbonn have created a niche in low cost phones using the standardized technology patented by established brands like Samsung, Ericsson or Google. These Brands license the use of their SEPs (Standard Essential Patents) relating to various mobile telecommunications standards and have committed to license these SEPs on FRAND (Fair Reasonable And Non-Discriminatory) terms.

So, why are these SEP owners dragging the phone makers to court?

Micromax was on the receiving end when Ericsson went to the Delhi High court alleging wrongful use of its patented technology ( SEPs) of 2G, 3G, 4G by Micromax, in their Smartphones, without payment of royalty. Other brands such as Xiaomi are also facing similar cases.

As directed by court, Ericsson and Micromax agreed to negotiate the so called Fair, Reasonable & Non-discriminatory royalty terms for their License Agreement and as an interim measure Micromax was made to pay royalties at a reduced rate. Nonetheless, the rate of royalty was still higher than expected by Micromax. So, Micromax initiated an investigation against Ericsson before the Competition Commission of India (CCI).

In 2009, India repealed its 40 year old Monopolies and Restrictive Trade Practices Commission and brought into force the new Competition Commission. The recently established CCI aims to promote fair play in the market. It watches anti-competitive conduct by companies which distort or stifle competition. Such a market watchdog is new in India and all over Asia, although it is modeled on well developed competition regimes in UK and EU.

The CCI is investigating the adverse impact on the smartphone market competition and entry barriers allegedly created by Ericsson by not granting the SEPs license of 2G, 3G, and 4G technology to Micromax on FRAND terms.

Standard is a method to equip a product, service or component to a certain uniform measure in order to ensure interoperability across all the devices, platforms and so on. For instance, the Wi-fi medium is a standard for all internet services just like the 2G, 3G Technology for Telecoms. Once a standard compliant product is made it becomes easier for the consumers to switch between products from different manufacturers. The telecom industry has announced that phone chargers will be standardized by 2017 so we will not need new chargers for different phones.

Why are SEPs essential for the smartphone business?

A patent that protects technology essential to a standard is called a standard-essential patent. It is impossible to manufacture standard-compliant products such as smartphones or tablets without using technologies covered by one or more SEPs. SEPs are different from patents that are not essential to a standard (non-SEPs), such as design patents, for example, which protect the design features of an invention. This is because, generally, companies can invent alternative solutions that do not infringe a non-SEP (whereas they cannot design around a SEP). For example, Apple is battling with Samsung for infringing its patented design of "slide to unlock" that's a a non-SEP technology.

Once a standard has been agreed and industry players have invested heavily in standard-compliant products, the market is de facto locked into both the standard and the relevant SEPs.

So, do the phone makers have any other choice?

Obviously not !

Competition issue around Standardisation – SEPs and FRAND licensing:

Standards are important for several reasons.

First, they facilitate the adoption and advancement of technology as well as the development of products that can interoperate with one another. Standards also lower costs by increasing product manufacturing volume, and they increase price competition by eliminating "switching costs" for consumers who desire to switch from products manufactured by one firm to those manufactured by another. They also lead to earlier adoption of new technology. There is, however, one downside to standards: they create "essential patents"1

Once a patent becomes an essential patent, it gains undue significance as a result. Companies that produce products governed by a standard become "locked in" to the technologies included in the standard. Customers have no practical choice other than to buy products that comply with the standard. Thus, the owners of essential patents gain market power. "FRAND commitments" are intended to prevent owners of essential patents from acquiring too much of the market power that would otherwise be inherent in owning an essential patent.

How is the Market Power Exploited?

Effects of the 'locked in' Network – The SEP owner enjoys the monopoly power gained over the entire network of manufacturers. Thus, they are in a position to indulge in anti-competitive tactics like "holding up" users after the adoption of the standard, extracting excessive royalty fees, setting cross-licence terms with competing licensees which they not otherwise agree to. Royalty-Stacking is also a big problem when a product uses more than one patent by different licensors.

Therein lies the need to regulate the behavior of dominant firms to alleviate these market concerns and to ensure that the benefits of standardisation are promulgated & actualized by customers and end consumers – SEP owners are required by many Standard Setting Organisations (SSOs) to commit to licensing their SEPs on FRAND terms.

FRAND commitments are designed to do two things:

(i) ensure that the technology incorporated in a standard is accessible to the manufacturers of standard-compliant products, and (ii) reward SEPs holders financially.

What are the consequences of companies refusing to comply with these commitments?

In the Samsung and Motorola cases, the European Commission clarifies that in the standardisation context, where the SEPs holders have committed to (i) license their SEPs and (ii) do so on fair, reasonable, non-discriminatory (FRAND) terms, it is anti-competitive to seek to exclude competitors from the market by seeking injunctions on the basis of SEPs if the licensee is willing to take a licence on FRAND terms. In these circumstances, the seeking of injunctions can distort licensing negotiations and lead to unfair licensing terms, with a negative impact on consumer choice and prices.

As a result of the Commission's investigation, Samsung committed to not seek injunctions in Europe on the basis of SEPs for mobile devices for a period of five years against any potential licensee of these SEPs who agrees to accept a specific licensing framework. This licensing framework consists of a mandatory negotiation period of up to 12 months, and if the negotiation fails, third party determination of FRAND terms by either a court, if one party chooses, or arbitration if both parties agree. The commitments make it clear that, if the parties raise concerns about the validity or infringement of the licensed SEPs, the judges or arbitrators will have to take those into consideration.

The Commission's Motorola and Samsung decisions confirm the Commission's balanced approach with respect to IP rights and competition.

Whilst IP rights are important for innovation and growth, they should not be abused to the detriment of competition and ultimately consumers.

In concrete terms, these decisions clarify that SEP holders should not abuse their market power by "holding up" willing licensees with injunctions.

These decisions provide further clarification and guidance to industry on the limitations on market control strategies imposed by competition law to SEP-based injunctions.

In case of any dispute, it would be submitted to arbitration.2

Royalties charged by Ericsson for its SEPs as on 5 November, 2012:

  • GSM – 1.25% of sale price of product of the Informant,
  • GPRS – 1.75% of sale price of product of the Informant,
  • EDGE – 2% of sale price of product of the Informant,
  • WCDMA/HSPA: Phones, Tablets – 2% of sale price of product of the Informant,
  • Dongles – USD 2.50 per dongle.

On the other hand, is injunctive or exclusionary relief appropriate for the SEP holder against any party that wants to use the standard in its product / smartphone but is not willing to sign licensing terms?

Few would disagree that the SEP holder should be entitled to monetary damages in a situation where an SEP holder offers a FRAND license to a user of its standard, but the user delays the signing of the license complaining that the royalty rates are too excessive even though the manufactures sells the infringing product in the market.

The debate on this question was before the Delhi High Court recently. While considering the "appropriateness" of such relief—

Some would say injunctive relief should be rarely awarded to an SEP holder unless there were extraordinary circumstances as it would distort competition, harming competition in the vibrant market of technology / smartphones. Others would favour the patent holder's right to exclude others from making, using, or selling a patented invention without the patent holder's express authorization, fearing dilution of innovation and ultimately consumers.

The Delhi Court has granted relief to Ericsson (SEP owner) by injuncting Micromax (Phone maker) from using the SEPs without payment of royalty at prescribed rates. According to the Court, Micromax was delaying the signing of the license terms while it did not refute the validity of the patents – As admitted even in their complaint before the Competition Commission alleging abuse of market power by Ericsson through the ownership of the SEPs in question.

In the US and EU, sabotaging competing Brands through sham litigation is considered as an abuse of dominant position, gained through patents or licenses. Competition authority's concern is to check companies that have key technologies & know how and can utilize SEPs to shut out rivals or demand unfair royalties from users.

Since injunctions generally involve a prohibition of the product infringing the patent being sold, seeking SEP-based injunctions against a willing licensee could risk excluding products from the market.

US chip maker Qualcomm agreed to pay a record $975 million fine to settle a case brought against it by Chinese authorities. After facing investigations into allegations of anti-competitive behaviour, in the US and EU it faced antitrust inquiry in China and South Korea.

Thus the current market scenario raises a question–

Whether Technology Giants like Google can monopolize their market of Technology (Android) especially when the buyers are gaining more bargaining power?.

Policing the platform may prove increasingly ineffective with competing technologies entering the market?

On the other hand there are disputes over exclusive distribution rights granted to Micromax (India ) & Cyanogen (China ).

These territorial restrictions in contractual relationships with multi jurisdictional manufacturers / distributors create overlapping / conflicting interests as the number of manufacturers continues to grow.

The economics of technology can be compared to the car Industry where each brand has a different look even though they may share a chassis technology. Lets see in the smartphone market, how long will the world's leading companies in the OS market – Google's Android and Apple Inc's iOS control the market as competition intensifies with competing brands.


[1] The term "essential patents" refers to patents that are essential to a standard and such technologies are selected by a standards development organization ("SDO").


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions